Getting a mortgage is the best way for ordinary individuals to get their own homes. They don’t need a large lump sum of money which can be pretty challenging to find, much less to earn.
However, millions of people worldwide are suffering from the rental trap. What should be beneficial for people slowly turns out to be a nightmare. In this blog, we’ll discuss the rental trap and how to avoid it.
What is a rental trap?
The rental trap happens when you don’t have enough income and salary to accommodate your daily needs and mortgage. What happens is that almost all of your money goes to your mortgage. In return, you no longer have enough to acquire more assets–or worse–your basic needs.
How to avoid the rental trap?
While the rental trap is directly affected by your monthly salary or income, there are some ways how you can avoid it.
1. Save up for a deposit
The best way to avoid the rental trap is to secure a low monthly rate on your mortgage. You can do this by starting with a more significant down payment.
2. Mind your credit score
Your credit score is the best way to get a reduced monthly mortgage. So, avoid paying late on your mortgage and acquiring more assets that you may not be able to pay in the future.
3. Look for government subsidies
You can refinance your mortgage and replace it with a government-backed mortgage. These government subsidies are free of transfer fees, bond registration costs, and other additional fees that may be increasing your previous mortgage.
4. Aim small
Last but not least, it’s always best to get a property that will suit your needs and your payment capacity. This is especially true for first-time homeowners–while it may be disheartening not to get your dream house, you can always refinance in the future to achieve it!